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FEATURE STORY
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Barred by Lunatics Law
How a preexisting substituted judgment
order can preclude posthumous challenges to a will in California (and
possibly elsewhere): the lesson of Murphy v. Murphy
By Samantha
E. Weissbluth, senior counsel, and John P. Mounce, summer associate,
Foley & Lardner LLP, Chicago
A recent California appellate decision should make all estate litigators
sit up and take notice.
The decision, in Murphy v.
Murphy, 164 Cal. App. 4th 376 (Cal. App. 1st Dist., June 26, 2008),
held that a posthumous challenge to a will was barred by collateral
estoppel insofar as those issues were in fact litigated or could have
been litigated in a substituted judgment proceeding while the decedent
was still alive.
The common law substituted judgment doctrine as applied to property
issues dates back to the English Lord John Scott Eldon’s Court of
Chancery in the early 1800s. It was built upon a tradition of the king
holding for safekeeping the property of “lunatics” within his realm.
A “lunatic,” as opposed to a mere “idiot,” was once of
sound mind, is not any longer, but may be again at some point in the
future. In 1816, the seminal case of Ex parte Whitbread
presented a near-timeless set of circumstances. A family member wanted
money from a still-living “lunatic’s” estate. Lord Eldon
asserted, without evidence, that the “lunatic” himself would make
the gift to the family member if he were able.
The substituted
judgment doctrine, from this humble birth, hopped the pond to New York,
grew throughout the United States, and was eventually codified in many
state statutes.
The modern doctrine of substituted judgment has come under fire from
critics of legal fictions, who disparage the notion that judges might
somehow divine the wishes of those with mental incapacities. Posthumous
challenges to wills weather this criticism no better. Adducing the
desires of those with even severe mental incapacities is still easier
than adducing the desires of the dearly departed.
Add this to
concerns of judicial economy, and the result is judicial incentive to
deal with challenges to wills while the testator is still alive, namely
in a substituted judgment proceeding. This is precisely what occurred
in the Murphy case.
While California Probate Code Section 2580 et seq. politely
abandons “lunatic” as a legal descriptor for the mentally afflicted,
it provides for the appointment of a conservator of an estate if the
conservatee lacks the legal capacity to make a decision in the matter.
It is then the conservator’s responsibility to manage the estate in
accordance with the conservatee’s wishes (or what such wishes would be
were the conservatee of sound mind).
It is against this
statutory backdrop that Murphy arises—a new twist on an old
story stemming from a dispute between a brother, William J. Murphy Jr.,
and his sister, Maureen Murphy, over the estate of their late father,
William J. Murphy Sr.
(Article continues below
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(Article continues here.)
Family Feud
The senior William and his wife, Elaine, were married in 1949 and had
two children, William Jr. and Maureen. In 1991, Elaine became ill, and
Maureen moved back into the family home in San Francisco to help care
for her mother. Elaine died in 1999, and at that time, William the
father was 74 years old and a successful practicing attorney. In 2001,
he suffered a debilitating stroke.
After William Sr.’s stroke, William Jr. initiated proceedings for
appointment of a professional conservator of his father’s estate.
Court papers stated the son’s concern that his sister Maureen was
“impos[ing] her will” upon their father.
Four days before the court’s appointment of a conservator, William
Sr., apparently upset about his son’s allegations and about his son's
having chosen to discuss family affairs so publicly, executed a
holographic will and living trust effectively disinheriting William Jr.
and leaving his entire estate to Maureen.
About a year and a half later, William Sr.’s conservator requested
court approval of the estate plan, via a petition for substituted
judgment. All interested parties, including William Jr., received
notice of the proceeding. There were no objections, and the court
entered a substituted judgment order authorizing the conservator to
re-execute William Sr.’s will and trust.
William Sr. died a year later, in 2004, after which point the son filed
suit against his estate claiming he'd been wrongfully disinherited.
William Jr. alleged that his father and mother had entered into an oral
testamentary agreement that the survivor between them would leave all of
their property to William Jr. and Maureen equally. He also contended
that his sister had exercised fraud and undue influence over their
father and thereby occasioned his disinheritance.
The trial court found for William Jr., and Maureen appealed.
Landmark Decision
On appeal, the court found that William Jr. was collaterally estopped
from litigating the validity of his father’s estate plan—because he
had had the opportunity to do so in the substituted judgment proceeding.
The court first noted that the issues presented by William Jr.’s claim
(undue influence, fraud and the existence of the oral testamentary
agreement) involved the same underlying “factual allegations” as the
issues under consideration at the substituted judgment proceeding, even
though they weren’t actually litigated there.
The court, with a rather long chain of reasoning, concluded that any
matter that was “within the scope of the action, related to the
subject-matter and relevant to the issues” was close enough to be
barred, and William Jr.’s claims met such standards.
The court disposed of any lingering due process considerations, finding
that William Jr. had the same incentive to litigate in both proceedings
and that he had a full and fair opportunity to litigate the substituted
judgment proceeding.
Finally, the court found that public policy considerations favored using
collateral estoppel to serve the integrity of the judicial system,
promote judicial economy and avoid vexatious litigation.
The lesson here is that court approval of an individual’s estate plan
when that individual is under a conservatorship will protect the plan
against any posthumous contest to it (assuming, of course, that
interested parties receive notice of the conservator’s petition to
approve the plan).
Those of you with clients in dicey family situations in which you worry
about a posthumous contest might want to weigh the risks, costs and
public nature of a conservatorship proceeding (or some kind of
declaratory judgment action if permitted in your state) to try and
bulletproof your client’s plan.
And, attorneys representing clients disgruntled by a now incapacitated
relative’s estate plan should certainly come armed and ready for
battle upon receiving notice of an action for court approval of that
plan.
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